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If a business wishes to buy equipment outright, then Hire Purchase can provide a flexible and cost effective alternative to a bank loan or overdraft funding.
Hire Purchase (or lease purchase, as it's also known) can provide the best of both worlds - not only will your business benefit from using the equipment straight away but the payments can be spread over the life of the equipment. At the end of the lease term title of the equipment can passed for a nominal fee.
- Financing for up to 100% of the purchase price
- Payment structure agreed at the outset for easy budgeting
- The equipment can be purchased for a nominal fee at the end of the term (option to purchase fee)
- Repayments can be matched to your cash-flow and the depreciation of the equipment.
- Repayments can be linked to fixed or variable rate interest
How Hire Purchase works
Hire Purchase is a way to buy the equipment that your business needs without depleting your cash reserves. Hire Purchase is flexible, it can be tax efficient and it can be used to buy anything from IT equipment to heavy plant and machinery. Hire Purchase also gives you the option of ownership title at expiry, making it suitable if your business wants to invest in assets that you want to use for the long term and keep, or eventually sell.
There is usually no need for additional security as the finance is secured on the equipment.
Hire Purchase can be a tax-efficient way to buy equipment, as the interest on the payments is tax deductible and capital allowances on the equipment can be claimed immediately.
Hire Purchase is suitable for any equipment your business wishes to own, and that may have a useful life beyond the finance agreement term. For example: printing presses, construction equipment, materials handling machinery, commercial vehicles and agricultural equipment.
Finance leasing is a flexible, tax-efficient way for your business to acquire the equipment it needs without using up cash reserves, and you may realise almost all of the equipment value at the end of the term:
Financing for up to 100% of the purchase price
A Finance Lease offers the option to carry on renting the equipment for after the primary period, often at a reduced or nominal sum, OR if permitted in the lease contract, to sell it and retain a proportion of the cash proceeds when the lease term ends
VAT is payable on the rentals, not on the purchase cost of the equipment
Depending upon the asset type and term, you may be able to offset the rental payments against your taxable profit
With a Finance Lease there is normally no need for additional security as the finance is usually secured on the equipment.
How a Finance Lease works
With a Finance Lease, ownership of the equipment purchased is retained by the Lessor (us), but we can allow you to sell the equipment on our behalf at the end of the term and keep all some or all of the proceeds.
Payment structures can be chosen that best match your business' cash-flow patterns to make budgeting easier. Finance Lease funding is normally shown as 'on balance sheet'.
A Finance Lease can be suitable for businesses of all sizes, and for all types of equipment. For example, if your business wants to buy commercial vehicles and avoid having to pay upfront the full VAT on the equipment cost, and want to recover some of its value at the end of a fixed period by acting as sales agent; then a Finance Lease could be the right finance solution for your business.
An Operating Lease lets your business benefit from fixed costs and predicted annual use. The equipment remains the property of the Lessor (us) and will need to be returned at the end of the lease term.
- With an Operating Lease, rental and return conditions are fixed/known at the outset
- We take the risk in the resale value of the equipment for you
- Potential for improved cash-flow and tax-efficient payments
How an Operating Lease works
An Operating Lease could improve your business' cash-flow immediately and help to streamline your finances as the rental payment stream can be matched to reflect not only your income pattern, but also the life of any contracts that you may use the equipment to fulfil.
The rental amount that is paid under an Operating Lease tends to reflect the use and, therefore, the depreciation of the equipment over the chosen lease term. This often leads to an Operating Lease having lower rentals over the same period when compared to other lease options such as Finance Lease and Hire Purchase.
At the end of the primary Operating Lease term, you can either return the equipment to us, or, in most circumstances, you can agree with us to extend the lease for further periods.
As the 'user' of the equipment or asset you do not need to worry about the disposal process, that is handled by us as the owner of the equipment or asset. All you need to do is to return the equipment to us on the terms agreed at the end of the lease and our experienced Asset Management team do the rest.
An Operating Lease can have significant tax and financial advantages too compared to alternatives such as Hire Purchase or a Business Loan. The rentals may be treated as a revenue expense for budgeting purposes.
Contract Hire is a type of lease agreement with a maintenance schedule attached to it. It can provide a solution for businesses that want to concentrate on their core business activities, whilst avoiding the financial risk and administrative burden of owning and maintaining any vehicles or equipment that they use.
Key features and benefits of Contract Hire:
- Fixed rentals for the whole package, making budget planning easier with Contract Hire
- Flexible Contract Hire terms to meet your requirements with variable duration and mileage/hours terms
- Maintenance of the equipment is included in the monthly/quarterly rentals, and so spread the cost over the Contract term
- Contract Hire normally removes depreciating equipment from the balance sheet and the associated risks of owning vehicles or equipment
- Contract Hire is suitable when, as a business, you have a particular contract or task to fulfil over a specified period and you want certainty over costs and equipment availability.
- Typical equipment types for Contract Hire are materials handling, commercial vehicles and cars.
As a Lessor we can provide a wide range of funding solutions to companies wanting to expand their business offerings by investing in new or used equipment. The majority of our finance agreements are secured on the equipment detailed in the transaction. However, not every investment can be directly linked to a piece of machinery or equipment. As a consequence, and in specific cases, we also offer a Business Loan to support your business' investment plans.
In some instances, the Business Loan will need to be supported by a chattels mortgage over equipment within the business or other forms of additional security.
Examples of situations where a Business Loan may be suitable include, dairy cows/replacements, buildings/sheds and building improvements, software funding and development, training and installation costs.
This is an agreement that facilitates a sale where the supplier is not an equipment dealer. For example, this could be a local farmer to farmer sale. The seller will need to provide evidence of clear title to the assets and invoice accordingly.
Sale & HP / Sale & Lease back
This finance option enables you to convert a recent purchase (within 90 days of original purchase from a bona fide supplier) to a finance agreement which releases cash back into your business. SGEF would purchase your asset at an agreed value, and finance it back to you over a fixed period with repayments matching the income stream generated by the asset.
The lease back option can be written on either a Finance Lease or a Hire Purchase agreement.
Stocking is also known as Inventory Finance. This is a finance product that is only available to equipment manufacturers, dealers and suppliers.
Stocking is a short term finance facility that enables the manufacturer, dealer or supplier to finance their stock of new, used or demonstration equipment over a short period of time. This facility can help to ease the business' cash flow in between the buying of the stock from the manufacturer or the acquisition of part exchange/trade-in units and subsequent sale to the end user.
Societe Generale Equipment Finance has many years experience in advising and establishing Receivables finance structures for the service and solution providers that we partner with across a range of industry sectors. We are able to convert revenues generated from fixed term service and supply contracts into cash for the solution provider from the commencement of the contract, thus preserving working capital, enhancing returns and removing credit risk whilst maintaining ownership of the core assets required to fulfil the contract.
These structures can often result in the service or solution provider recognising revenue on the delivered capital and service element of the contract and, if combined with our administration of the revenue collection and distribution functions, can prove to be an attractive proposition to the end user.
Our Receivables finance offer keeps the service or solution provider in control of their core activities and responsibilities, but most importantly, the relationship between the service or solution provider and the end user customer is left intact.